Printing RM1.9 Trillion – Why Ringgit Could Breach 4.50 And Plunge Into A Free Fall As Investors Continue To Lose Confidence

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Jul 13 2022
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Ringgit does not seem to be in a good position. The Malaysia currency is trading at more than 4.43 to a dollar – the lowest for the year, having plunged from 4.16 in January 1. Technically, its resistance is 4.50 – less than RM0.07 away. The last time the currency was trading at this low was in early March 2020, when the country crowned its first backdoor government of Muhyiddin.


Immediately after Muhyiddin Yassin was sworn in as the 8th Prime Minister on March 1, 2020, Ringgit crashed to as low as 4.44. But the illegitimate prime minister lasted only 17 months. He reluctantly resigned after withdrawal of support from UMNO faction led by former PM Najib Razak and UMNO president Zahid Hamidi. Ismail Sabri became the 9th Prime Minister on August 21, 2021.


But it appears PM Ismail is another disaster like his predecessor. In fact, the turtle-egg man is worse than Muhyiddin, whose economic mismanagement and Covid-19 mishandling were legendary. Ringgit has been consistently losing its value under Sabri administration for the last 10 months. The currency has never strengthened below 4.10 to the greenback since August 2021, the day Sabri became the new PM.

Prime Minister Ismail Sabri - Clueless

Prior to Muhyiddin’s despicable “Sheraton Move”, the political coup that toppled the democratically-elected Pakatan Harapan government, the local currency almost breached the 4.50 level. It briefly touched 4.499 in early January 2017 as investors dumped the Ringgit after the 1MDB scandal involving then-PM Najib triggered global investigations across three continents.


The 1MDB scandal, which saw at least US$4.5 billion siphoned and spent on high-end property, luxury goods and lavish holidays and parties involving Najib, his family and partner Jho Low, was also responsible for the collapse of Ringgit in 2015. The currency plunged from RM3 to RM4.48 in 2015 during Najib administration, despite burning truckloads of foreign reserves to stabilize the Ringgit.


Interestingly, in the last 10 years, the currency had never recovered to RM3.80 since August 2015, the day Najib’s 1MDB scandal exploded and spooked international investors. During the Pakatan Harapan government, at least the currency stabilized at RM4.20 to the U.S. dollar. Under the scandal-plagued Najib administration and backdoor regime of Muhyiddin and Ismail, Ringgit is toast.

Malaysia Ringgit vs US Dollar - Chart - 13 July 2022 - Najib, Mahathir, Muhyiddin, Ismail

The most disturbing fact is that Ringgit has effectively lost its value – forever – after it breached RM3.80 to the greenback and hasn’t looked back, even though then-PM Najib implemented the Goods and Services Tax (GST) effective April 1, 2015. The extra revenue from GST, averaging RM43 billion a year, wasn’t enough to impress or convince the currency market.


Coincidentally, RM3.80 was also the exchange rate adopted by the Mahathir administration to peg the Ringgit to the U.S. dollar to address the Ringgit’s volatile fluctuations as a result of the 1997-98 Asian Financial Crisis. This means the country’s financial situation has actually become worse than during the financial crisis more than 25 years ago. Can’t we use the same trick again?


According to former Bank Negara Malaysia (central bank) deputy governor, Dr Sukudhew Singh, pegging the local currency to the greenback isn’t a child’s play otherwise any country could easily pull the stunt. When you peg the Ringgit to the dollar, you must have the ability to defend the exchange rate, which means when speculators try to weaken it, you must have the reserves to intervene and defend it.

Malaysia Ringgit and US Dollar

The pegging also worked some 25 years ago because the country had a large current account surplus post-1998. Essentially, strong demand for Malaysia’s exports (partly due to depreciation of the Ringgit) had provided strong foreign-currency inflows – vital bullets to defend the fix RM3.80 exchange rate. Today, the government can’t peg it due to weak reserves and trade surplus.


Political instability isn’t the only factor that affects the confidence of investors, otherwise how do you explain that the local currency stabilized at RM4.20 during the previous 22-month-rule of Pakatan Harapan government, but deteriorated to almost RM4.50 during Muhyiddin’s short-stint 17-month rule and current Ismail administration, who is entering its 11th month?


Even if political instability is the prime factor, who was the one started stirring up racial and religion sentiments among the Malays that the Muslims and Malay Rulers have lost power to the “Chinese, Christians and Communists” in an attempt to destabilize the Pakatan Harapan government? The current unelected backdoor government – UMNO, PAS and Bersatu – has been ruling for the last 28 months and see where they are leading the nation.

Perikatan Nasional Muhyiddin Yassin and Leaders of Political Groups

In the context of Malaysia, investors have fled in droves, and is still in the process of leaving because they are not only spooked with the political instability created by the racist and radical Malay-Muslim government, but also has lost confidence with the clueless and incompetent leadership of the country. First, it was Mahiaddin Yassin and now it is Ismail Sabri.


According to the United Nations Conference on Trade and Development (UNCTAD), the UN body that deals with trade, investment, and development issues, Malaysia was the worst performer in the region. Inflow of foreign direct investments (FDI) into Malaysia stunningly dropped by 68% from US$7.8 billion (RM31.5 billion) in 2019 to US$2.5 billion (RM10.1 billion) in 2020.


While it’s true that FDI inflows to Southeast Asia contracted by 31% to US$107 billion in 2020 due to the Covid-19 pandemic, other countries in the region did not do as badly as Malaysia. In comparison, Singapore saw its FDI plunged by 37% and Indonesia fell 24%, while Thailand dropped by 50% and Vietnam lost by 10%. Surprisingly, Philippine saw its FDI increased by 29%.

Coronavirus - Malaysia Covid-19 Record Cases and Deaths - KLCC

Essentially, Malaysia managed to attract only 2.3% of total FDI in 2020 – an extremely pathetic performance. It means despite political instability flamed by UMNO, PAS and Bersatu, the previous multiracial Pakatan Harapan administration had performed better. It also proves that foreign investors were not convinced with an unelected backdoor government.


Foreign investors have every reason to doubt the illegitimate governments of both Muhyiddin and Ismail. According to M2/GDP ratio from Bank Negara Malaysia, there was a huge spike of money supply (M2 is a measure of the money supply that includes cash, checking deposits, and easily-convertible near money) against the country’s GDP (gross domestic product).


When the M2/GDP ratio skyrocketed to 6.8 from 5.6 around second and third quarter 2020, it means the country has 6.8 times amount of money compared to GDP growth. This could only mean one thing – Malaysia was suddenly flushed with cash because backdoor PM Muhyiddin was printing money. Exactly how much money? The additional 1.2 jumps in ratio means 1.2 multiples of GDP.

Malaysia Banking System - M2 GDP Ratio - Chart - Printing Money

Based on 2019’s GDP of US$364.7 billion, it means the backdoor government had printed at least US$437 billion or RM1,900 billion – that’s RM1.9 trillion. The M2/GDP ratio is also a measurement of how much money is needed to create a single dollar of GDP. Crucially, M2 is a critical factor in the forecasting of economic issues like inflation. Printing money increases money supply, which in turn causes inflation.


So, when Deputy Youth and Sports Minister Wan Ahmad Fayhsal suggested during a session with BFM Radio in November 2020 that Bank Negara print more money, his idea of “helicopter money policy” was not merely an idea. The Youth Chief of the Malaysian United Indigenous Party (Bersatu) knew his boss had already printed a country load of Ringgit.


Now we understand why Malaysia has to spend RM77.3 billion this year – the highest in the history ever – to contain inflation. It’s not because the economy was booming and people have too much money to spend, which leads to increase in the prices of goods and services. Rather, the secret money printing scheme has led to a depreciation of Ringgit, reducing the currency’s purchasing power.

Printing Money - Helicopter Money

This is also the reason why the central bank had to raise the overnight policy rate (OPR) by 0.25% last week (July 6) for the second time in two months to fight inflation, despite claims that the nation’s inflation rate was at laughable 2.2%. When a U.S. bank is offering a 3% return for 1 year Fixed Deposit while Malaysia bank is only offering a 1.75% return, it is not rocket science why foreign funds would flow out from Malaysia.


The fact that Bank Negara can’t hike the interest rate at the same percentage point as the aggressive Federal Reserve makes the Ringgit even less attractive as the dollar continues to strengthen with more increases and higher hike rate in the pipeline. By the end of the year, the Fed is expected to take rates to between 2.5% and 3.25%, while Malaysia is projected to hike the OPR to between 2.25% and 2.50%.


To make matters worse, instead of appreciating against the greenback when the crude oil prices go up, as it usually did, the local currency seems to have diverged or broke away from the crude oil trend in recent months. Even the recent rally in crude palm oil (CPO) fails to help the local currency to climb higher. Clearly, something is broken in the country’s financial system and structure.

Petronas Station - KLCC

The international investor community has and will continue to relocate investments in higher-yielding assets in the United States or even park their money in neighbouring countries like Singapore, Vietnam or Indonesia. The best part is the government is still in denial. They never fail to cook up excuses to justify the plunging value of Ringgit.


They will say a weaker currency can boost the competitiveness of Malaysia’s export. When that fails, they will say the economy is on the right track. Finance Minister Tengku Zafrul will repeat like a broken record that the fundamentals of the economy are strong and the growth prospects remain strong. Other boring mantra – the value of the Ringgit is expected to remain stable and continue to strengthen.


Then the government will lie that hundreds of foreign investment projects worth hundreds of billions have been secured. When the currency continues to weaken, they will blame it on weaker China’s growth or Xi Jinping’s Covid-19 lockdown. Of course, the clueless UMNO-PAS-Bersatu government also blames the U.S. inflation as well as the Russia-Ukraine War.

Ringgit and US Dollar

Heck, Silly Sabri has even formed a special task force on “Jihad” against inflation, having little clue about the relationship between currency and inflation. Still, despite all the excuses, it can’t explain why the Ringgit is the worst currency when compared to regional currencies like Singapore Dollar, Indonesia Rupiah, Philippines Peso and Thai Baht. The Ringgit will plunge into a free fall if breaches 4.50 to a dollar.


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Malaysia is destined to be like that due to problems started from Mahathir. A stable government was always destabilised by him during his UMNO time.
When PH and DAP were in power, they also screwed up the country. They had too broken promises and jeopardised the society. The worse are they tried stop helping the poor but after big complaints, they reduced a lot of help to the low income families. They also stopped a lot of subsidized daily products to the citizens. They are the same corrupted as UMNO stopped their enemies half way billions / millions projects and introduced their own useless millions / billions projects. They had done a lot of damages to the country despite promises to change before election. All the political parties in Malaysia are same corrupted, selfish, greedy, ……
The multi amount of royal families aren’t better and also sucking billions yearly from the country.
The royal families also interfere with politics and damaging the country.

If PH can be categorized as having done a lot of damages, what would you call BN and PN government?

Not fulfilling promise is one thing, to actually do the damage is another thing altogether.

Ini adalah suatu tulisan yg menunjuk kebodohan yg menyerlah. Duit tu bukan kerajaan print- duit tu adalah duit nombor ciptaan bank yg terhasil apabila Bank beri pinjaman/pembiayaan. Kalau bab ni tak faham tak payah panggil Finance Tweeter lah. Buat malu saja.Wan Fayhsal penyokong Gerakan Keadilan Monetari. Itu petikan interview 30 saat dg BFM. Tidak ada siapa yg menyaran ciptaan wang oleh kerajaan dalam sistem sekarang sebelum reformasi. Yg disarankan ialah ciptaan wang oleh badan bebas bawah kelolaan Parlimen bawah konsep wang Sovereign. Wang ni disalur 100% kepada ekonomi tampak untuk hasilkan output ekonomi jana kerja dan hapuskan pengangguran. Beza dg sekarang dimana bank menghasil wang 80% ke sektor peribadi yg menghasil inflasi am, inflasi gelembung perumahan, meningkat jurang miskin kaya, menghasil pengangguran graduan dan anak muda dan membeku gaji permulaan dan gaji buruh.Tapi rasanya intelek penulis ni tak sampai kesitu kot.

Thank you for confirming the system is flushed with RM1.9 trillion.

Despite throwing all your jargon, you still haven’t explain where had all the money gone, regardless of its form, either in printed notes or so-called “duit nombor ciptaan”. Memang “kecerdikan” kamu menyerlah.

Do you have any idea how much is RM1.9 trillion? It’s more than 5 times of Budget 2022. Based on your argument, no wonder PM Ismail Sabri has to cut cost now. Keep it up dude. The country needs more cerdik-pandai like you.

As a suggestion, commenters should be reminded that as this is a site that uses the English language, to stick to that. Ketuanan pidginspeak is not a proper language, it hasn’t even enough vocabulary even including those stolen words to make any subject understandable. Often a simple subject is rendered into gibberish when Ketuanan pidginspeak is used.

English may be the language of the colonialists but its use is universal even in those countries not colonised. Wan should not be shy about using it, learning it opens the door to a whole world of learning not available at all in Ketuanan pidginspeak, sadly. I’ve already said Ketuanan pidginspeak is an inadequate “language” seemingly only good for inadequate monkeys.

Not that I’m totally against Ketuanan pidginspeak, it’s just that other than striking a deal when buying a fish and some belacan, the use of the gibberish makes understanding any other things even more elusive and impossible. Which explains why for most of those learning maths and science in Ketuanan pidginspeak they get pretty messed up (words fcuked up also available in English).

Some other languages make for easier mastery of subjects but Ketuanan pidginspeak even with its profusion and confusion of stolen, borrowed and bastardised words is not wan of them. That’s clearly seen in the big number of those who have gone through schools and came out even worse than not getting fcuked up with our “education”. Having crap teachers definitely doesn’t help but that’s another subject and another headache.

I’ve never bothered learning Ketuanan pidginspeak, if I’m caught up with a speaker who cannot manage a bit of English (or Chinese or German or Japanese) ) I find shouting and using my own sign language works. Sometimes it doesn’t. But it doesn’t matter, those who are saddled with, no horsesh*t here, using Ketuanan pidginspeak are more than often those who cannot transcend above and beyond the rim of half a coconut shell and it does not matter anyway that I don’t need have much to do with any retard kept back by pidginspeak with nearly no vocabulary, funny sounding words, bad spelling, and limited use.

Ok lah, one! You either understand Abang here or you struggle one, notice how Ketuanan pidginspeak not only fcuks itself up, it also fcuks up other language some more one lah, wt ah fatt one!

Ketuanan pidginspeak is the language in Parlimen and that’s because the phcuking spastic politicians can’t speak any proper language one, wtf!

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